The birth of Ethereum and Ethereum dominance
Ethereum is a distributed ledger technology with a distributed state machine called the Ethereum Virtual Machine (EVM). To the layperson, these are the same. Here, however, we will outline a sharp distinction between Ethereum as a blockchain and the EVM. Ethereum is often described as a victim of its own success as its utility and dominance often results in congestion and consequently has expensive transaction fees, is too slow, and has a degraded user-experience compared to many of its layer 1 counterparts.
Despite chunks of ETH’s market cap being eaten into by competing smart contract platforms and layer 2s, Ethereum and also its EVM still remains dominant in the Web3 world. Why is this? Will this state of affairs change in the mid-to long-term and will Ethereum, the EVM or both be triumphant?
Ethereum as a blockchain
Besides having an EVM, Ethereum is a distributed ledger technology in the form of a blockchain that settles transactions. Due to the issues mentioned earlier, Ethereum has a comprehensive roadmap for sharding effectively solving all these existing issues. Ethereum also leverages layer 2s, optimistic rollups and zk-rollups to address scalability issues. These layer 2s include Optimism Arbitrum, Polygon, Zksync and a multitude of others.
What is the EVM?
The EVM is a distributed state machine in which a network of 1000’s of distributed nodes modify and update the state of Ethereum. The state of Ethereum is kept in a data structure called a modified Merkle Patricia Trie. To be more technical, the EVM is a runtime environment for Ethereum smart contracts which executes smart contracts and thus state transitions using EVM bytecode. These state transitions modify smart contracts, balances etc. from its current state to an updated state.
Why is the EVM important?
The EVM is important beyond the utility of its initial conception for several reasons:
- It is the part that deals with smart contract execution and thus dApps
- It is open source and replicable and therefore widely adopted by smart contract platforms
- Having an EVM layer and being a competing layer 1 to Ethereum allows a level of smart contract portability
- Native Solidity and Vyper language compatibility
- Can bring non-compatible coding languages to chains that use other languages such as Rust
- It increases and bolsters network effects on other layer 1s
- Can bootstrap nascent communities with developers, dApps and tooling
EVM dominance throughout the ages
Nearly every smart contract platform has been forced to create an EVM layer- Near has Aurora, Cosmos has Evmos, Polkadot has Moonbeam, Kusama has Moonriver, Avalanche has its C-chain, Fantom has the Opera chain etc. Solana is the exception, but will soon have Neon EVM. See here for a more comprehensive list.
But why is this? The tacitly unacknowledged reality is that Ethereum and the EVM have a first mover advantage due to Ethereum being the first ever smart contract platform. Ethereum also has the most developers, the most dApps and most importantly, the most developed dApp ecosystem overall. Therefore, to compete with Ethereum for the developer talent pool, competitors create the requisite tooling and portability necessary for Ethereum devs to write smart contracts and port dApps on to their chains.
Metrics
TVL breakdown by smart contract language
TVL breakdown by smart contract language reveals that again Ethereum’s Solidity is still the most dominant language used and the second most widely used language is Ethereum’s other language Vyper. Not until November 10th 2020 did any competing language emerge and even then it was diminutive.
The next biggest contender is the coding language Rust used on L1s like Solana and Near. At its peak on September 12, 2021, Rust was the third most used smart contract language by TVL with 7% TVL, Solidity at 81% and Vyper at 11%. Despite a loss of momentum, Rust is still the third most used smart contracting language in the web3 ecosystem.
So, what do these metrics indicate? Namely, that Ethereum languages and thus by extension Ethereum’s smart contract execution layer have retained their dominance despite multiple other languages encroaching and that importantly, at no point has Ethereum’s language pre-eminence been imperiled by a contender. This suggests that the EVM is not going anywhere in the short to mid-term.
TVL breakdown by smart contract language
An overall TVL breakdown by smart contract language reveals that again Solidity secures the most TVL followed by Vyper then Rust. This echoes the previous information and bolsters the fact that EVM compatibility languages are the dominant paradigm in the Web3 space and their lead has been unshaken.
Will Ethereum win?
Scalability could be the biggest problem Ethereum faces in the medium term, especially with other layer 1s on their back that don’t have the problems that Ethereum has, as they could get technologically outgunned.
The most probable medium-term challenge Ethereum faces is implementing sharding in a timely fashion. There are several reasons to believe this might not be implemented in the intended timeframe. Firstly, Ethereum has pushed back dates for its roadmap implementations on the beacon chain phase and the merge phase on multiple occasions. This is indicative that there will be pushback on the sharding phase. Secondly, many layer smart contract contenders are creeping up on Ethereum.
So, will Ethereum be able to bring its vision to fruition in terms of scalability?
The likely answer is yes. Even if Ethereum fails to accomplish the sharding phase of its roadmap, it still has a multitude of side-chains, optimistic rollups and zk-rollups solutions which are seeing increased adoption and will cushion any blows. These layer 2s are proliferating and will likely keep gaining momentum and traction in the future even when Ethereum’s sharding solution is implemented. Ethereum has proven itself secure, stable and scalable and will retain its dominance both through the use of its EVM and being a security and execution layer.
